Consumers are ordering products and services over computer networks such as the Internet in increasing numbers. FIG. 1 shows a typical electronic commerce (e-commerce) system used to conduct online transactions. Consumer 104 usually accesses a computer network such as the Internet through a browser program, and searches through product descriptions located at a merchant's world wide web site on merchant computer 108. After consumer 104 selects a product and places an order for it with merchant computer 108, consumer 104 typically sends billing information (such as a credit card number), as well as additional personal information (such as a postal address, a telephone number, or an e-mail address), to merchant computer 108. Merchant computer 108 then requests authorization from consumer billing authority 140 (e.g., a credit card payment processor) to charge the transaction to a consumer billing account identified by the billing information provided by consumer 104. After receiving authorization from consumer billing authority 140, merchant computer 108 notifies consumer 104 that the transaction has been authorized, and delivers the product to consumer 104.
There are numerous drawbacks associated with such prior art e-commerce systems. For example, consumers must provide their billing information to all the merchants from whom they wish to purchase products or services. This poses a security risk to consumers, since unscrupulous merchants can use that information to conduct unauthorized transactions. Moreover, consumers must also provide their personal information to merchants, who can use that identifying information to flood consumers with unsolicited mail, telephone calls, and advertisements. Merchants can also sell consumers' personal information, as well as information about the products or services purchased by specific consumers, to advertising companies or to companies that can compile detailed histories of the spending and purchasing habits of consumers. Many potential consumers are reluctant to engage in online transactions for fear that in doing so they can compromise not only the security of their billing accounts, but also their own privacy.
Merchants are also inconvenienced by prior art e-commerce systems because they must implement their own billing solution, which can be costly, time consuming, and technically difficult to integrate into their web site. In addition, merchants must also build extra security mechanisms into their web site in order to prevent hackers from breaking into their system and gaining access to databases with consumer account and billing information.
Another drawback of prior art e-commerce systems is that they are not set up to handle “microtransactions.” Microtransactions are transactions that involve small amounts of money, such as two dollars or less. The relatively high fees associated with processing such transactions prohibit merchants from making microtransactions available to consumers. This is an especially significant shortcoming on the Internet because consumers are much more likely to buy small-value items (such as a $0.50 news article, picture, or song) than large-value items (such as a $20 newspaper subscription or album).
Accordingly, there exists a need for an electronic commerce system and method that allows consumers to conduct transactions securely, confidentially, and without the aforementioned problems and inconveniences.